Lower tax rate means lower utility bills

20% of savings to be returned to customers, 80% to pay down debt

We Energies electric customers will receive a one-time credit in July and a slight decrease in electric rates in subsequent months from a portion of the savings from the company’s lower federal corporate tax rate, state regulators decided on Thursday.

The Public Service Commission determined that 20 percent of the immediate savings from the lower tax rate should be passed on to customers.

The remaining 80 percent of the savings will go toward paying down deferred costs that stood at $424.5 million as of Dec. 31 but that are not included in current rates.

All or most of those costs eventually will be included in customers’ electric rates.

“It’s an enormous debt that hangs out there,” Commissioner Mike Huebsch said during the hearing Thursday.

The deferred costs, some going back as far as 2002, are primarily tied to We Energies’ transmission system and a power plant in the Upper Peninsula of Michigan.

The commission approved a similar 80-20 split for electric customers of

Wisconsin Public Service.

The corporate tax rate was lowered to 21 percent from 35 percent as part of the tax reform and tax cut legislation passed in December.

Projected taxes are included as an expense when setting utility rates and the cost is passed onto customers.

The PSC’s staff estimated that We Energies electric customers will save $61.9 million a year from the lower corporate tax rate and that Wisconsin Public Service electric customers will save $27.8 million a year.

We Energies and WPS are part of Milwaukee-based WEC Energy Group.

That estimate, however, includes only part of the projected savings.

The commission’s staff still must work on how the changes in the tax rate will affect deferred taxes. That gets complicated and will vary by utility but could generate additional savings for utilities.

We Energies’ electric customers also will see savings from the lower tax rate on the coal power plant in Oak Creek and the gas power plant in Port Washington.

Gas customers of We Energies and WPS will receive all the savings from the lower tax rate.

The PSC staff estimates that works out to $23.4 million for We Energies gas customers and $5.7 million for WPS gas customers.

Electric and gas utilities also have seen savings from the lower tax rate paid by transmission and pipeline companies. Those savings are being passed on to customers.

The commission also decided that a number of smaller utilities throughout the state should pass all the savings onto customers immediately, starting with a credit in July and then a monthly credit going forward.

For a third group of utilities, the tax savings will be dealt with in rate cases that have filed or will be filed this year.